Indiana lawmakers want to address Medicaid spending by overhauling the state’s Medicaid expansion program. However, testimony and discussion so far has included misinformation and misleading information on the Healthy Indiana Plan, or HIP. Medicaid experts and advocates break down the facts about the state and federal program.
While Senate Bill 2 makes several other changes to broader Medicaid policies, the significant changes to HIP include reintroducing Indiana's previously halted work reporting requirements and limiting enrollment to 500,000 people — with some flexibility based on federal Medicaid policy. The bill also increases how often the state checks Medicaid member eligibility, which the Family and Social Services Administration announced it would be doing without a legislative mandate.
SB 2 passed the Senate in the first half of the legislative session. Lawmakers will begin the second half of session next week, where the bill will go through the house.
READ MORE: How do I follow Indiana’s legislative session? Here’s your guide to demystify the process
Who is eligible for HIP?
HIP is Indiana’s Medicaid expansion program, which means it covers “non-disabled” Hoosiers who are 19 to 64 years old and make less than 138 percent of the federal poverty line. The program is not limited to single or childless adults, despite the repeated claims of SB 2’s author, Sen. Ryan Mishler (R-Mishawaka).
However, the definition of non-disabled is a catch-all for anyone who doesn’t qualify for the traditional Medicaid program.
Adam Mueller is the executive director of the Indiana Justice Project and co-counsel on the case that resulted in Indiana pausing premiums or POWER account contributions for HIP members. He said a large number of people on the HIP program have disabilities or chronic conditions.
“We know it's really hard to meet the level of disability required by Social Security in order to qualify for traditional Medicaid,” Mueller said.
Under HIP, people with disabilities or chronic conditions such as HIV or muscular dystrophy, are classified as “medically frail.” FSSA has a list of conditions that can potentially qualify, but qualifying as medically frail ultimately depends on the severity of the person’s condition.
Is this the program causing the rise in Medicaid costs? How is HIP funded?
Medicaid has grown as an item in Indiana’s state budget, but the HIP program isn’t funded by it.
Federal funds cover 90 percent of HIP — which leaves the state responsible for 10 percent of the program. But, Indiana actually doesn’t cover that cost.
Indiana hospitals pay fees, known as the Hospital Assessment Fee or HAF program, that cover 90 percent of the state’s portion. FSSA said the rest is covered by cigarette taxes. No part of the program — including the administrative costs — comes out of the state budget.
FSSA said the growth in Medicaid expenditures was due to increased utilization of home- and community-based services in Medicaid waivers.
Senate Republicans said SB 2 addresses the growth of Medicaid in the state budget, especially following the 2023 Medicaid forecasting error.
Following that error, FSSA began releasing monthly Medicaid financial reports with commentary to explain what the reports meant. Those reports said that, even when HIP enrollment is higher than expected, it does not “impact the state’s general fund.”
Lawmakers said they were concerned the program could expand beyond what the Hospital Assessment Fee program and cigarette taxes are able to handle.
But those concerns haven’t played out. For example, in May 2024, actual HIP enrollment was more than 95,000 people higher than expected. But FSSA’s monthly report commentary still said that had no effect on the budget.
Senate Republicans said they hope to reallocate funds used for the HIP program to other programs. However, the bill's fiscal note reports that Indiana will collect less in hospital fees as a result of fewer people being enrolled in HIP.
Mueller said Indiana can’t do anything about the federal funding it would lose. By capping the program at 500,000 people, which is significantly less than the current enrollment, the state would lose the 90 percent match.
“If we were to cut down the 277,000 people, we could be looking at losing $3.5 billion in federal investment,” Muller said.
Are there any other fiscal impacts an enrollment cap could have on HIP?
Aparna Soni, a health economist and associate professor at the Indiana University Fairbanks School of Public Health, said Indiana could see some short-term savings from the enrollment cap, but might end up paying for those costs later on. She used a mass Medicaid disenrollment in Tennessee as a case study to explain.
“It was a very similar situation,” Soni said. “In 2005, the Medicaid program became too expensive for the state to finance.”
The 2005 mass disenrollment targeted Tennessee’s expansion program as well. Researchers have studied the short- and long-term effects of lawmakers’ decisions. Soni said in causal studies that compared Tennessee to similar states, uninsured rates increased by almost 5 percentage points.
“It had a host of adverse effects,” Soni said. “Reductions in access to care, even increased eviction filings and increased eviction cases. Devastating impact on personal financial outcomes. Declines in credit risk scores, increase in delinquent debt.”
Soni said there was a predictable increase in preventable health issues and untreated chronic health conditions.
“What people found was that use of hospitals and doctor visits and dental visits declined, but the use of private, free or public clinics actually increased,” Soni said.
Soni said Indiana might have experienced some savings in 2005 from dropping 200,000 Medicaid recipients, but ultimately the cost came back to the state in the form of other fiscal issues.
Joan Alker, Georgetown Center for Children and Families executive director and research professor, said an enrollment cap undermines the point of the federal Medicaid program.
“It's a very draconian step,” Alker said. “It means it becomes very arbitrary. Who gets health coverage and who doesn't. Are you somebody who you lose your job in July and they've already hit the enrollment cap when you try to apply in August?”
Alker said some people will get health care and some people won’t — but there won’t be any “good discerning reason.”
“Medicaid, in its current structure, is really a first responder to a recession. And employment will go up and more folks will be able to enroll in Medicaid, and that's just automatic — that's just what happens,” Alker said. “And it's happened in all of the recent recessions this country has had. But if you have an enrollment cap, that's not true anymore.”
Lawmakers have still not clarified how they will remove people from the program to meet the enrollment cap since there are more than 500,000 people currently in the program.
But, the “work requirement” will at least encourage people to work, right?
Alker said Medicaid experts actually refer to these as “work reporting requirements” to emphasize the Medicaid member is being required to report something they likely are already doing. She said work reporting requirements function more as a punitive measure that takes away coverage rather than supporting a working individual.
“If you give folks health insurance, they're more likely to be able to work because they're able to get their health conditions under control,” Alker said. “These folks with very low income tend to be working in jobs that don't offer health insurance.”
Soni pointed to Arkansas as another case study. It implemented the requirements briefly in 2018.
Soni said 18,000 people lost Medicaid coverage in Arkansas during this time.
“Many illegitimately, actually, so one-third of the target population surveys found that they were just completely unaware of this work requirements policy that they were supposed to submit some documentation,” Soni said.
While others knew about the policy, Soni said they found the reporting process “very confusing or inaccessible.” She said most people on Medicaid already meet the reporting requirement either through employment or through a common exemption.
Soni said, of the people who lost coverage in Arkansas, more than half had to delay health care and nearly 65 percent delayed medication because of the cost.
“People had serious problems paying off medical debt,” Soni said. “And the most ironic part is that those work requirements did not actually achieve their intended purpose, which is to increase employment.”
Alker said the goal of encouraging employment is reasonable, but reporting requirements may not be the best approach.
“It's kind of a solution in search of a problem because in fact, if you look at who these folks are, most of them are already working full- or part-time,” Alker said.
So, people on Medicaid work?
Yes, both Alker and Soni said research shows a majority of people in Medicaid programs work, with 44 percent working full-time and 20 percent working part-time. Many of those adults were not eligible for employer-sponsored health insurance at their job.
Tracey Hutchings-Goetz, with Hoosier Action, has been organizing and working with HIP members for years. She said one of the biggest misconceptions is that people in the HIP program don’t work, when in reality, most of them do.
“If someone thinks they don't know someone on HIP, they're wrong,” Hutchings-Goetz said.
She said HIP is an essential lifeline for contract workers, farm workers, part-time workers, people in the service industry, caregivers and people starting small businesses.
“The next time you go and get your haircut, ask your barber, ask your hairdresser, ‘Where do they get their insurance?’” Hutchings-Goetz said. “Because, you'll likely hear one of three answers, the ‘Healthy Indiana Plan,’ ‘I'm uninsured’ or ‘I'm on the marketplace,’ depending on how much they work.”
Mueller said this policy “fundamentally misunderstands” what it means to be a low-income person in Indiana. He said people rely on community.
“Every person I know that is on HIP is, either working at the level that they can work at or they're volunteering,” Mueller said. “They're helping neighbors out. They're already doing the things that these work requirements are supposed to be checking, so what's the value add to that other than more cost to the state?”
These changes could cost the state more money?
The costs that Mueller referred to are the potential increased administrative costs, which are included in the fiscal note of SB 2.
The increased eligibility checks, disenrollments and work reporting requirements require state employees to do the additional tasks. While Mishler said the savings from the changes will outweigh the administrative costs, Medicaid experts and advocates aren’t as sure.
Alker said the work reporting requirements require the state government to jump in and monitor many aspects of people's lives, which can get expensive.
“Unfortunately, it does require this pretty invasive system that a state has to set up to track all these things about your life,” Alker said. “Are you working this month? Are you not working this month? Is your health good? Are you taking care of a parent or a child? There's lots of red tape here.”
Hutchings-Goetz said this will likely involve a system that subjects Medicaid members to a “time tax,” where each step in the process can act as a barrier.
For example, Indiana may choose a system where people track their hours on a form that has to be signed by their boss, that then has to be scanned into a portal and uploaded correctly. Hutchings-Goetz said if any step in that process goes slightly wrong they could lose their coverage, even though they fulfilled the work requirement.
"You're really looking at something that is fiscally irresponsible and a bureaucratic waste, on top of a policy that is only effective at kicking people off their care and is completely ineffective at returning people or getting people into the workplace,” Hutchings-Goetz said.
If these requirements were implemented, it could create a potential waitlist of more than 250,000 people. Beyond just reapplying, it could mean months or years of waiting, and more expensive care if they are invited off the waitlist.
Alker said increasing eligibility checks increases the administrative burden for both the state and the Medicaid member without providing any real benefit.
“This doesn't really do anything to address costs in our health care system or even the Medicaid program other than just simply cutting people off who have trouble with the paperwork, who don't ever get the letters,” Alker said.
Does Indiana have the communication infrastructure to handle these changes?
During public testimony, a representative from conservative think tank Foundation for Government Accountability, claimed the state had a robust communication system prepared to take on increased eligibility checks and the paperwork for work reporting requirements. However, advocates weren’t as sure about that.
Hutchings-Goetz said many people depend on the mailed letters because they can’t reliably access the portals or people don’t feel comfortable looking at them at the public library.
“I keep coming back to the handful of letters arriving after the reply-by date, confusing and difficult-to-follow language, getting conflicting information when calling the FSSA hotline,” Hutchings-Goetz said
Hutchings-Goetz said, compared to the national average, Indiana’s redetermination process is harder because of FSSA processes and communication. She said she’s concerned about increasing the number of times people have to do that each year.
And the research supports her concern. Alker said Indiana is “kind of famous” for having a very high uninsured rate.
Why are there more people enrolled in HIP now than before the COVID-19 public health emergency?
Everyone currently on the program had to go through a redetermination process. It was called the Medicaid “unwinding” and Indiana completed its unwinding process in March 2023.
Hutchings-Goetz said everyone who enrolled during the pandemic went through this process.
“Even if you were originally self-attested that you met the income requirements, you have now been required to provide documentation demonstrating your continued eligibility for the program,” Hutchings-Goetz said.
Alker said the reason there are more people on the program now is likely a combination of factors — not unrelated to the state’s high uninsured rate. Indiana’s Medicaid program has had a lot of red tape over the years, which has led to people getting kicked off of the program and having to enroll.
Alker said during the COVID-19 continuous coverage period more people likely became aware of the Medicaid program and the eligibility criteria — and the confusing parts of Indiana’s program were paused until the end of the public health emergency.
That meant it was easier to learn about the program, join it and stay enrolled.
The last part of Indiana’s unwinding process was to bring back premiums or POWER account contributions — but premiums for Medicaid expansion programs also have a rocky legal ground.
Just a few days before Indiana officially restarted them for the first time in years, a federal judge ruled, similar to work reporting requirements, premiums also go against the objectives of the Medicaid Act because they limit coverage.
“Between the combination of the pandemic and the litigation, those complications were suspended during the pandemic, and so that's why I think we saw enrollment go up,” Alker said.
READ MORE: Advocates offer advice for Medicaid members navigating federal ruling's effect on HIP
Alker said Indiana is notorious for having a complicated program, but it’s been easier for people to navigate so there are more people on it.
Hutchings-Goetz said the assumption that the increase in the number of people in the program is linked to fraud or mismanagement is unfair to the people in the program.
“We would not have so many folks enrolled in HIP or any other Medicaid program if we did not have so many folks who qualified for them,” Hutchings-Goetz said. “We have a lot of HIP members because we have a lot of people who are poor and sick after years of a global pandemic.”
What about the Medicaid fraud claims?
Most Medicaid fraud isn’t committed by Medicaid members, and all members currently enrolled in the program had to go through the redetermination process during the Medicaid unwinding.
In fact, Alker said less than 0.1 percent of money recovered from Medicaid fraud is from Medicaid members. She said Medicaid enrollees are typically victims of fraud, not perpetrators.
Alker said if lawmakers want to address Medicaid fraud, a “worthy policy goal” can be to add more staff to their Medicaid fraud control unit.
“It's not cutting people off,” Alker said. “Cutting Medicaid is not going to fix fraud. You've got to go after the bad actors. And again, the folks on Medicaid are typically the victims of fraud.”
Hutchings-Goetz said fraud in Indiana Medicaid programs is less likely to be on an individual level more likely to be on an institutional level. She pointed to a recent “whistleblower” lawsuit where two former state officials alleged several Indiana hospital systems and managed care entities committed “tens, likely hundreds” of millions of dollars of Medicaid fraud.
“SB 2 contains no new requirements for the managed care entities who perpetrated this fraud on our state” Hutchings-Goetz said. “In fact, SB 2 institutes a set of new requirements for their workers to constantly be monitoring the eligibility of Medicaid members.”
Hutchings-Goetz said it’s irresponsible to point the finger and shift the blame onto individual Medicaid members for problems that exist “at the level of our for-profit health care system.”
Doesn’t the POWER accounts federal ruling mean lawmakers have to do something?
Mueller said now might be a bad time to do something. The federal ruling is in a complicated spot.
The approval of the HIP program got sent back to the Centers for Medicare and Medicaid Services for review, but Indiana appealed the ruling. This means the federal government is supposed to be making recommendations and, at the same time, it’s a case in the D.C. Circuit Court of Appeals.
Despite Sen. Chris Garten’s (R-Charlestown) claims that lawmakers have to get their “arms around this,” Mueller said it’s “sort of in flux right now.”
Mueller said there is nothing that lawmakers “need” to do at this point.
“It's not clear what exactly the CMS, the feds, will do,” Mueller said. “And so you may decide you want to say, ‘Let's do X, Y, or Z,’ whatever it is. But then you may have to go back and change it again because the feds have said ‘No, this is how you have to do something.’”
Hutchings-Goetz said the General Assembly does not need to take any action this year in order for HIP to continue.
“There is language which allows for HIP to continue should it be out of compliance with a federal rule change,” Hutchings-Goetz said. “In fact, if they had to do anything, like, what's been going on the last six months? Because the program's been running.”
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Do waivers really let Indiana have more control over the program?
Indiana has several Medicaid policies that exist or existed through what are known as Section 1115 waivers. When a state submits an application for a plan, like Indiana with HIP, they can submit a waiver to try to “waive” part of Medicaid law.
Some states do this to use funds for something that isn’t included in the original statute, like housing. Indiana used a couple of waivers for the HIP program. POWER accounts and the previously halted work reporting requirements were a part of a waiver.
Indiana also has a waiver that allows it to use Medicaid expansion funding to treat substance use disorder and serious mental health issues.
A representative for a conservative think tank claimed during public testimony the reason why Georgia is the only state approved for work reporting requirements is because they expanded through a waiver rather than a state plan amendment like a “typical” Medicaid expansion program.
But Georgia is fundamentally different from other states — including Indiana — which tried to implement work requirements. It didn’t have a program.
Mueller said the theory is that the state can sidestep federal protections for people on Medicaid by taking them out of the state plan.
“HIP has always had as a part of it, an approved waiver, an 1115 demonstration waiver,” Mueller said. “This wouldn't be something that you would do in order to get approval for a waiver. That has always been a part of the process. To be clear, I don't think that removing people from the state plan would eliminate those Medicaid protections.”
When other states implemented premiums and work reporting requirements, courts have ruled on whether it resulted in a loss of coverage. Since all the other states had established programs, there was a threat to Medicaid coverage.
But Georgia started its program from scratch in 2023 — no one outside the traditional Medicaid population had Medicaid coverage in the state, so it couldn’t result in a loss.
Alker also said by doing the waiver the way they did, Georgia took a federal lower match — meaning it pays more for its program, covering fewer people, at a much higher administrative cost.
If people lose their coverage, there are other options, right?
Despite claims that people who lose HIP coverage can easily find coverage in other Medicaid programs or qualify for subsidies on the federal health care marketplace, it isn’t that simple.
It can be incredibly difficult to qualify for other Medicaid programs. And Alker said if someone qualifies for HIP, they can’t qualify for the health care marketplace — people can’t be eligible for both.
“That's federal law, and that makes sense because we wouldn't want the federal government being subsidizing things twice,” Alker said.
That means in states with a full Medicaid expansion program — like Indiana — people who qualify for HIP, can’t get subsidies to cover premiums. Alker said if someone’s income surpasses 138 percent, meaning they no longer qualify for HIP, then they have options within the marketplace, but until that point, the federal government’s support is directed toward the Medicaid expansion program.
However, even if people have access to both Medicaid and marketplace options, Soni said they aren’t interchangeable which can have long term consequences for the Medicaid member.
“All of a sudden they're forced to go on a completely different insurance plan,” Soni said. “That insurance plan might not be covering their providers in the marketplace. Plans likely will have much higher deductibles and co-pays than people the Medicaid population is used to.”
Soni said people can have a hard time navigating these types of changes which can lead to surprise billing, medical debt and adverse financial outcomes. She also said unless there is a really strong system of navigators and people receive individualized guidance it can cause even more issues.
What’s happening at the federal level?
Medicaid is a big topic for both the federal and state budgets, and advocates have been concerned about this for months.
Alker said the U.S. House is targeting Medicaid for potential cuts.
“This is not a popular policy. But if they rush it through without a lot of scrutiny, that's where we may end up with large Medicaid cuts,” Alker said.
Indiana has a Medicaid “trigger law.” That means, if that 90 percent federal match drops at all, the HIP program automatically unwinds. Indiana is not “stuck” if federal lawmakers change the match percentage, but Medicaid members would be stranded without coverage.
However, SB 2 does change the trigger law’s language to give lawmakers the ability to choose if they want to unwind the HIP program if Congress changes the federal match percentage.
Alker also said while most of Indiana’s discussion is focused on the HIP overhaul, that isn’t the only population that would be affected by federal changes or cuts to Medicaid.
“The reality is most of Medicaid's funding is going to seniors and people with disabilities. The majority of folks and nursing homes are funded by Medicaid. And children, of course, are the largest group of enrollees,” Alker said. “These are the folks who are really in the crosshairs as well if Congress moves ahead to cut Medicaid.”
Alker said Hoosiers should also be paying attention to what is happening to the program on the federal level.
Abigail is our health reporter. Contact them at aruhman@wboi.org.